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AC 300 Activity - 04.11.2023 Groupings: Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

Groups 1 through 6 were divided into activity groups. Each group was instructed to answer problems in two parts by discussing answers within their group and writing the solutions on a yellow sheet of paper. Part 1 involved filling in the blanks with terms related to intercompany transactions. Part 2 presented financial information for companies Paper and Book, and their related transactions between 20x5-20x7, asking the groups to calculate specified amounts. The groups were to write their answers directly in the provided document.

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96 views

AC 300 Activity - 04.11.2023 Groupings: Group 1 Group 2 Group 3 Group 4 Group 5 Group 6

Groups 1 through 6 were divided into activity groups. Each group was instructed to answer problems in two parts by discussing answers within their group and writing the solutions on a yellow sheet of paper. Part 1 involved filling in the blanks with terms related to intercompany transactions. Part 2 presented financial information for companies Paper and Book, and their related transactions between 20x5-20x7, asking the groups to calculate specified amounts. The groups were to write their answers directly in the provided document.

Uploaded by

Frencis A. Esquierdo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AC 300

Activity – 04.11.2023

Groupings:
Group 1 Group 2 Group 3 Group 4 Group 5 Group 6
1. Baltazar 1. Banderado 1. Bangonon 1. Cañete 1. Daño 1. Demata
2. Emano 2. Erolon 2. Esquierdo 2. Jimenez 2. Langrio 2. Mendoza
3. Pasaol 3. Peñero 3. Porras 3. Ramos 3. Yaon 3. Alfornon
4. Ayco 4. Barejacion 4. Caday 4. Calimpong 4. Cutan 4. Dela Cruz
5. Dela Rosa 5. Dijan 5. Gapas 5. Garcia 5. Inaldo 5. Jabierto
6. Miranda 6. Pepito 6. Rosal 6. Ruelo 6. Tablatin 6. Ubo

Instruction: Answer the following problems by group and ensure that every group member contributed and
understood the answers provided. Write your answers in a yellow sheet of paper the attach your
solutions.

Sample format:
Part 1. Part 2.
1. 1.
2. 2.
3. 3.

Part 1. Fill in the blanks. Write your answer directly in the paper.
1. Inventory sales from a parent to one of its subsidiaries are called _______________ sales.
2. Inventory sales from a subsidiary to its parent are called _______________________ sales.
3. Intercompany transactions are usually recorded in ____________________________ accounts.
4. All intercompany transactions are __________________________________ transactions.
5. Not all _______________________-party transactions are intercompany transactions.
6. An intercompany transaction is an arm’s-length transaction if the transfer price is the same price
charged to a(n) __________________________ party.
7. The concept of intercompany profit to be deferred for consolidated reporting purposes is that of
__________________________ profit.

Part 2. Problem solving


On December 31, 20x5, Paper Co. purchased 60% of the outstanding common shares of Book Ltd. for
P760,000 in shares and P200,000 in cash. The statements of financial position of Paper and Book
immediately before the acquisition and issuance of the notes payable were as follows (in 000s):
Paper ______Book____
Book Fair Book Fair
Value Value Value Value
Cash P360 P360 P200 P200
Accounts receivable 520 500 380 380
Inventory 800 880 400 360
Capital assets 1,820 2,000 1,420 1,640
P3,500 P2,400
.
Accounts payable P 380 P380 P260 P260
Long-term liabilities 1,200 1,200 1000 1000
Common shares 500 600
Retained earnings 1,420 540
P3,500 P2,400

The difference in the carrying value and the fair value of the capital assets for Book relates to its office
building. This building has an estimated 20 years remaining of useful life.
During 20x6, the year following the acquisition, the following occurred:
• Throughout the year, Book purchased merchandise of P800,000 from Paper. Paper's gross margin
is 30% of selling price. At December 31, 20X6, Book still owed Paper P250,000 on this merchandise.
75% of this merchandise was resold by Book prior to December 31, 20x6.
• Throughout the year, Book sold merchandise to Paper totalling P500,000. The gross margin in these
products is 25%. At the end of 20X6, Paper had not yet resold 60% of this merchandise.
• Management fees were paid to Paper from Book totalling P250,000.
• Book paid dividends of P250,000 at the end of 20x6 and Paper paid dividends of P500,000.
During 20x7, the following occurred:
• Throughout the year, Book purchased merchandise of P1,000,000 from Paper. Paper's gross margin
is 30% of selling price. At December 31, 20x6, Book still owed Paper P150,000 on this merchandise.
85% of this merchandise was resold by Book prior to December 31, 20x7.
• Throughout the year, Book sold merchandise to Paper totalling P650,000. The gross margin in these
products is 25%. At the end of 20x6, Paper had not yet resold 40% of this merchandise.
• Management fees were paid to Paper from Book totalling P250,000.
• Book paid dividends of P250,000 at the end of 20x7 and Paper paid dividends of P500,000.
• Paper uses the cost method to report its investment in Book.

Statements of Financial Position


As at December 31,20x7
(in thousands of Pesos)

Assets Paper Book


Cash P 50 P 210
Accounts Receivable 575 410
Inventories 825 430
Capital assets, net 2,870 1,760
Investment in Book 960 _______
Total assets P 5,280 P 2,810

Liabilities
Accounts payable P 465 P 325
Long term liabilities 1,290 950
Common shares 1,260 600
Retained Earnings 2,265 935
Total liabilities and shareholders' equity P 5,280 P 2,810

Statements of Comprehensive Income


For the year ended December 31, 20x7
(in thousands of Pesos)
Paper Book
Sales P 2,520 P 2,400
Management fees 250
Dividend income 150 ______
P 2,920 2,400
Cost of sales P 800 P 1,200
Depreciation and amortization expenses 670 325
Management fees expense 250
Other expenses 460 135
P1,930 P 1,910
Net income P 990 P 490

Statements of Changes in Equity — Retained Earnings Section


For the year ended December 31,20X7
(in thousands of Pesos)
Paper Book
Retained earnings, December 31, 20X6 P 1,775 P 695
Net income 990 490
Dividends declared ( 500) ( 250)
Retained earnings, December 31, 20X7 P 2,265 P 935

Requirement: Write the amounts directly in the paper then attach the solutions
1. The full-goodwill arising from acquisition on December 31, 20x5 amounted to:
2. The non-controlling interests on December 31, 20x5 amounted to:
3. The amount of goodwill on December 31, 20x7 amounted to:
4. The non-controlling interests on December 31, 20x7 amounted to:
5. The consolidated retained earnings on December 31, 20x6 amounted to:
6. The consolidated retained earnings on December 31, 20x7 amounted to:
7. The capital assets, net on December 31, 20x7 amounted to:

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